You’ve spent years building your retirement nest egg—saving diligently, investing wisely, and contributing to accounts like your 401(k), IRA, or Roth IRA. But how do you turn those savings into a sustainable income stream once the paychecks stop?
This is one of the most important financial transitions of your life. In this guide, we’ll explore how to develop a retirement income strategy that balances reliability, tax efficiency, and long-term growth.
🧱 Step 1: Build a Foundation with Social Security Benefits
While Social Security may not be your primary source of retirement income, it remains a critical piece of the puzzle.
What’s the Maximum Social Security Benefit in 2025?
In 2025, the maximum monthly Social Security benefit at full retirement age is $4,018 — or approximately $48,216 annually.[¹]
Many retirees use this income to cover fixed expenses like housing, utilities, and healthcare, reducing how much they need to withdraw from savings.
When Should You Claim Social Security?
- Earliest age: 62 (with reduced benefits)
- Full Retirement Age (FRA): 67
- Maximum benefits: Begin at age 70
💡 Tip: Delaying Social Security past FRA increases your monthly benefit by up to 8% per year. Factors like health, marital status, and continued employment should guide your decision. Consult a financial advisor before filing.
🧮 Step 2: Create a Smart Withdrawal Strategy
With Social Security as a base, the next step is determining how to draw from your other savings. This requires strategic planning across different account types with varying tax treatments.
The Three Types of Retirement Accounts:
| Account Type | Examples | Tax Treatment |
|---|---|---|
| Taxable | Brokerage, savings, checking | Capital gains tax on profits |
| Pre-tax | Traditional IRA, 401(k), SEP | Tax-deferred growth, taxed at withdrawal |
| Post-tax | Roth IRA, Roth 401(k) | Tax-free growth and withdrawals (if qualified) |
General Withdrawal Order:
- Taxable accounts first (to reduce future tax drag)
- Pre-tax accounts next (401(k), Traditional IRA)
- Roth accounts last (maximize tax-free compounding)
This order is not one-size-fits-all. Market conditions, your tax bracket, and personal goals all matter.
📉 Step 3: Protect Against Sequence Risk
Sequence of returns risk refers to withdrawing funds during a market downturn, potentially locking in losses. To protect your portfolio:
- ✅ Diversify: Across stocks, bonds, and cash-equivalent reserves
- ✅ Build a cash buffer: Consider setting aside 6–12 months of expenses
- ✅ Use flexible withdrawal rates: Take less when markets are down
- ✅ Prioritize essential expenses: Cut discretionary spending when needed
💬 “A downturn early in retirement can have lasting effects. Flexibility helps preserve capital.”
📆 Step 4: Understand Required Minimum Distributions (RMDs)
Starting at age 73, you must begin taking RMDs from most pre-tax accounts—even if you don’t need the income.
RMD Fast Facts:
- Applies to Traditional IRAs, 401(k)s, SIMPLE IRAs, etc.
- Does not apply to Roth IRAs for the original account owner
- Penalty: 25% for missing an RMD (reduced to 10% if corrected within 2 years)[⁴]
Your first RMD is due April 1 of the year after turning 73. All others are due by December 31 annually.
📌 Work with a financial professional to plan RMDs in a tax-smart way—especially if you want to avoid unnecessary income spikes.
🪦 Step 5: Know the 10-Year Rule for Inherited IRAs
Thanks to the SECURE Act, most non-spouse beneficiaries of inherited IRAs must deplete the account within 10 years of the original owner’s death. Starting in 2025, annual RMDs apply during those 10 years.[⁵]
Exceptions: Spouses, disabled individuals, minor children, and those <10 years younger than the decedent may follow different rules.
🔁 Step 6: Consider a Roth IRA Conversion
Roth IRAs offer tax-free growth and no RMDs—making them a valuable tool in retirement income planning.
Pros of Roth Conversions:
- Avoid future RMDs
- Allow tax-free withdrawals in retirement
- Useful in estate planning (beneficiaries get tax-free income)
- No income limits on conversions
Cons to Watch For:
- Immediate tax liability on the converted amount
- 5-year rule: withdrawals within 5 years could incur penalties if under age 59½
💡 Converting during a market dip can reduce the tax impact. Always model this out with a financial planner.
📈 Bonus Tip: Stay Invested for Long-Term Growth
While preserving principal is a priority, don’t ignore growth.
- Plan for 20–30 years in retirement
- Maintain a portion of your portfolio in equity investments
- Rebalance periodically to align with your risk tolerance
📞 We Can Help You Create a Strategy
Navigating retirement income planning requires a mix of investment knowledge, tax awareness, and emotional discipline.
📅 Schedule a consultation to build a personalized strategy that includes:
- Social Security timing
- Tax-smart withdrawal sequencing
- RMD and Roth conversion planning
- Portfolio diversification for growth and protection
You worked hard to build your savings. Now let’s make sure they work just as hard for you.
🧠 FAQs
✅ When should I start taking Social Security?
Most people are eligible at age 62, but full benefits come at age 67. Delaying until 70 results in higher monthly payouts.
✅ What is the penalty for missing an RMD?
25% of the amount not withdrawn (reduced to 10% if corrected within 2 years).
✅ Is Roth conversion right for me?
It depends on your tax bracket, income needs, and time horizon. Consult a professional.